How can you best measure effective corporate governance?

It is easy to consider corporate governance as a tick box exercise that simply needs a policy as a solution. But this is a dangerous mindset. The high profile ‘scandals’ which have dominated the press in recent years are proof of this. To remain vigilant and effective, organisations have to change the way corporate governance is perceived – from a nice to have, to a necessity. An effective corporate governance mindset needs to underpin every decision and action taken by an organisation and a Board. This therefore means it needs to be measured.

We’ve seen all too often that corporate governance is only assessed when something has gone wrong. When an organisation knows it hasn’t taken the adequate steps to defend its staff, consumers or suppliers. It is too infrequently under the spotlight when things seem to be going well. 

But organisations first need to think about what criteria they’ll be measuring themselves against – deciding what sustainable success looks like. There are inevitable criteria which feature in the various and numerous corporate governance codes, but over and above those it is important to consider metrics such as: 

  • consistently high employee engagement levels/feedback scores;
  • low employee turnover and employee absence metrics; 
  • effective escalation of employee and stakeholder concerns, with no hesitancy in dealing with the root cause;
  • a genuinely diverse and socially mobile workforce;
  • increasing levels of community engagement, through formal or informal schemes; and
  • a narrowing or absence of gender pay gaps. 

There are undoubtedly more. 

Ultimately, good governance calls for much more than just compliance. It is about creating a culture and climate of consistency, responsibility, accountability, fairness, transparency and effectiveness for employees. 

For advice on how to assess how effective your approach to corporate governance is, contact Hannah Gibson-Patel.